The Clarity Deficit

Why deficit spending is more populist than practical.

Deficit spending. It’s all the rage in the US, from progressive politicians to populist economists the call goes out for “greater spending to offset the recession”. Money’s cheap, the need is great and history shows it can work, or so they say. But is it that true, and is that really going to help?

The basic theory of maintaining demand in our economies is sound, but the proposal to spend borrowed money to maintain it has limited applicability (Jeffrey Sachs, Financial Times, June 2010). To misquote the master of fiscal interdiction, the economy can stay rational longer than policy can remain illiquid. We cannot at the same time profess belief in monetary economics and propose to subvert it. In other words, we cannot propose to inject more liquidity, more demand, into the economy without also proposing how to pay for it and what kind of demand we expect to stimulate. The debate must be about what to do in our specific context now, not about competing theories of economic policy. Our reality is that we are carrying structural budget and trade deficits into it a period that requires very significant investment.

The rationales for deficit spending today rely on appeals to empathy and historical precedent, rarely is there rational analysis of how the imbalance that they propose to create would be corrected. While the desire to do something to alleviate the plight and suffering of those victimized by the recession is both honorable and understandable, the proposed solutions must have a stronger foundation in the reality of our predicament and the practical possibilities available to us.

Let’s look at the arguments proffered to support the case for further deficit spending at this time. They boil down to two assertions: one, that the spending will stimulate future growth and that that growth (along with a little inflation) will make today’s borrowing affordable in the future; and, second, that the historical lesson of the Great Depression is that fiscal rectitude robbed us of an early exit, only rectified by the splurge of deficit spending that accompanied the Second World War.

First, the idea that growth and inflation will make our debts affordable in the future assumes that we grow our wealth and that inflation is controlled. The anticipation is that growth will exceed 3% and inflation will be constrained to single digits.

Just how much growth can our current economies sustainably achieve? Our modern economies are basically tooled for 20th-century style industrial growth, fed by an unsustainable power infrastructure. Any increases in demand today necessarily feed fuel into an unsustainable, waste generating economic system dependent on limited supplies of fossil fuels. The real need in our economies is for investment in re-infrastructuring to support sustainable growth, but that is not where anything but a vanity veneer of the proposed deficit spending would be directed. The principle supporting argument advanced by the proponents of deficit spending is that it will stimulate demand today, and we have to ask ourselves if that is not simply sacrificing our grandchildren to feed our comfort now, while wasting the opportunity to actually invest in our futures.

Even if we put aside concerns about sustainability, the cost of primary inputs into our economies today, from foods to oil and just about everything in between, are rising and forecast to increase by 50% to 100% within a decade (Sir David King, The Guardian, June 2010). Increases in demand today automatically trigger rises in the price of raw materials that are primary determinants of the costs basis of our economy; for instance, the price of oil is directly related to the prospects for growth in the US, and as soon as there is a predicted rise in US demand the price of oil goes up. These cost increases suck wealth out of the US economy in most cases.

Inflation is dramatically more likely than growth, to a point of near assuredness, if there is no real growth in wealth. Monetary economic systems are completely dependent and finely balanced on the concurrence of money supply and real wealth, the former without the latter necessarily results in inflation. None of the proponents are arguing that deficit spending today will directly result in real increases in wealth, the proposal is simply to maintain demand on the grounds that real wealth growth will be stimulated by the demand. This has some limited validity, but it is important to note that the vast majority of the proposed spending would be consumed immediately by the social needs of the society, leaving increases in wealth substantially lagging behind the increase in money supply. This is a recipe for inflation and would be spotted by the would-be lenders way before it becomes a fact, resulting in increased borrowing costs that would sap any increase in wealth achieved.

So if the assertion is that we will be able to grow and inflate our way out of the debts we create, we are wrong on both counts. We are unlikely to generate net growth and we are very likely to create inflation. And the inflation will not mitigate our debts because the markets will spot the risk and inflate the cost of our debts to compensate.

Turning our attention to the historical narrative offered to support the importance of spending our way out of depression, we need to look at the circumstances of that history and ask ourselves if we are in the same context today. The example is that the Western economies only truly emerged from the Great Depression when deficit spending dramatically accelerated with the advent of a concerted war effort in the 1940s. That history is true, but is deeply flawed as an example of what we could follow to emerge from this recession. The number and variety of reasons why the history does not apply to us are great but let’s have a go at a few of the obvious ones.

Firstly, World War II left only one industrialized economy effectively untouched: the USA. As a result of this preeminent advantage the US was able to grow its wealth very dramatically in the years following the war and thus easily afford to repay the debts. The years following WWII were effectively a free-for-all for the Americans, and to a lesser extent the British, because they had little or no economic competition. That is most assuredly and evidently not the case today. The world has many strong economies today and growth in US demand today will result in the accumulation of wealth over a much more distributed geography than was the case in the 1950s. In fact, deficit spending in the US today is most likely to result in greater increases in wealth abroad than it is at home, while the debt will be entirely American.

Second, the spending in the 40s was focused on production capacity, not demand enhancement. The equivalent today would be to spend all the money on greening our infrastructure, something we should do, but not the intention of the proponents of deficit spending. It is possible to invest without borrowing, as I explain later.

Third, the deficit in the 40s was funded from a basically domestic debt market when global fluidity was almost nonexistent. Today’s deficit must be funded in a highly fluid global money market, using international sources for at least half of the debts. This means that borrowers today are subject to the inspection and opinion of economic observers across the globe, who have a myriad of options for what to do with their money. Thirty, and even ten, year debt today is substantially more expensive than it was in the offered historical example.

Fourth, material input costs today are substantially more volatile than they were in the 40s. In the 40s and 50s the cost of many raw material inputs was still falling in real terms, as the effects of advances in the sciences of discovery and extraction increased available supplies, at the same time that speed to market and cost of production were reduced. This is most certainly not the case today; the cost of primary inputs into our economies today are only going to rise, especially energy costs.

Fifth, the demographics of the modern societies that host the economies of which we speak have almost exactly the reverse characteristics of the historical example. Today we have aging populations with high demands for social support within reproductively stable demographic profiles. Our futures promise greater social infrastructure burdens, not the larger contributing workforces of the 40s and 50s.

So, compared to the historical example: we have more competition for the benefits, greater constraints on activity and higher costs of borrowing, within a more globally fluid economy, with a completely different demographic profile.

The 21st century is not the 20th century, and we are not in the same position as our grandparents. The idea that we can spend our way out of this recession, like our grandparents spent their way out of their Great Depression, is both false and a disservice to the great pain inflicted on them by the worldwide war that created their circumstances. We must face our challenges with a clear understanding of the world we live in, and we must develop solutions in the context of our situation and with the objective of developing a sustainable future for ourselves, our grandchildren and the planet we inhabit.

Given the constraints on both the source and use of funds that we face today, it becomes apparent that rather than running up debts to fuel demand, we must invest in re-infrastructuring our economy while reducing our dependence on borrowing – a mighty challenge indeed! Which brings us back around to one of the motives for proposing the deficit spending: empathy for our fellow citizens and an understanding that our peace and freedom are dependent on a more balanced distribution of material security across our society. How can we reduce borrowing, increase investment and maintain our social cohesion simultaneously? That is what we need to do, and I doubt there’s a single proponent of deficit spending that would disagree, it’s just that they assume it’s not possible to do all three at the same time, and so they propose a remedy for one or two out of the three. In reality our social cohesion is doomed if we don’t do all three: debts, inflation and failure to adjust to climate changes are the three most common causes of social collapse.

In order to do all three there is one key factor that must be achieved: a reduction in real (aka monetary) costs. As we have just examined, this will not be a reduction in the cost of material inputs, nor a reduction in the cost of capital, so it must be a reduction in the remaining element in the cost of production: labor. The key to understanding how the cost of labor can be reduced is to remember that the “cost” we are talking about is monetary cost, measured in Dollars or Pounds or Yen. Monetary costs are significant of wealth, and costs paid in money are necessarily significant of the transfer of wealth. If costs can be met without money, then wealth does not get used to satisfy them, and wealth does not need to be borrowed to fund them.

There is a significant portion of labor costs that do not need to be satisfied with wealth transfer, these are the cost of satisfying what Maslow termed as “hygiene factors” in his Hierarchy Of Needs. That portion of labor costs that are made up of hygiene factors and can be satisfied with the transfer of labor instead of money, can be removed from the monetary cost equation. Those costs do not need to be funded with money, instead they can be “funded” by the transfer of labor within a social system. For instance, if transport is free to me, that reduces my need for monetary compensation commensurate to my need for that transport. Of course transport is not free, because there are material inputs to its provisioning and operation, but if that portion of the cost of transport that is represented by the hygiene needs of the workers within the transport system was satisfied in-kind, the monetary cost of the transport service presented to me would be similarly reduced. There is a cyclical and repetitive reduction in the cost of labor the more the hygiene needs of the workforce are met without monetary transfer. Because hygiene factors are nearly universal across the population, the exchange of labor as a replacement for currency has universal value and similarly reductionist effects on the cost of labor across the economy and society.

Even just the availability of hygiene services at reduced cost has the effect of reducing labor costs, even if many do not avail themselves of the actual services. Establishing the universal availability of basic services that satisfy the hygiene needs of the workforce at little or no monetary cost reduces the cost of labor in the economy significantly. The size of the cost reduction can be measured in that portion of income it is necessary to pay the labor component of satisfying hygiene needs; in most economies an easy indicator of this cost is some portion of the mandated minimum wage.

Analyzing the hygiene services in the modern economy (housing, food, health and elder care, education, transport and information access) suggests that 80% of the cost is attributable to labor, and of that about one third is the equivalent of minimum wage. If 50% of that is provided by in-kind services, the reduction in the cost of providing the hygiene services themselves is around 13%, a factor that is at least repeated throughout the private sector as well. If the cost of labor across the economy was reduced by half the minimum wage, sufficient monetary value would be liberated to invest in infrastructure without borrowing, and the cohesion of society would be enhanced. The impact on taxation revenues would be minimal because the hygiene portion of incomes is not usually tax burdened, and the hygiene services themselves are not typically subject to consumption taxes.

The move to universal hygiene services has the potential to negate the annual budget deficit of most industrialized countries at the same time as it enables development of a sustainable microeconomic fabric that generates real wealth across a broader spectrum of society, and enhances resilience against the turbulence of climate instability. Instead of increasing debts to increase demand which results in accelerated climate change, we can reduce debts to increase sustainable development that begins to mitigate our impact on the climate. If we were to implement universal services within existing budget constraints, reduce costs and invest in infrastructure, that would be a more relevant narrative for our current predicament than deficit spending to maintain unsustainable demand!

The 21st century is the birth of the global age and we must put away our 20th-century toys if we are to successfully navigate the waters of our modern world. Borrowing is a 20th-century tool that requires segregations and imbalances that are no longer sustainable, in the 21st century we must learn to live sustainably without borrowing from each other or from the planet. By definition a self-sustaining system prospers from its inputs such that its balance sheet is in equilibrium at the end of each cycle – that is the nature of the planet that hosts us, and it is a process we are obliged to align ourselves with.

Reimagining our options

Why borrowing, taxing, printing and cutting are not our only options.

Why we don’t have to tax, borrow, print or cut.

Has it occurred to anyone that these are not our only options?

The prevailing logic (we won’t call it wisdom) goes something like this, and I’m sure you’ll find this very familiar.

We understand the need for a social safety net, especially important in urbanized societies where the poor cannot “return to the farm” in bad times, and the value of certain investments in our social infrastructure that sustain our economy and our social fabric, but we cannot afford to pay for them – meaning that our government does not raise enough in taxes to be able to pay for the services.

Here, below, are the reasons and rationales offered for why this problem is only resolvable through austerity measures, meaning reductions in social services and investments.

1) We cannot raise taxes to create more revenue because those taxes will destimulate our economy, resulting eventually in lower tax revenues. In other words, raising taxes is a self defeating strategy that will only require yet higher taxes in the future, until the economy is so deteriorated that it cannot create sufficient wealth to support the burden of the social infrastructure at any taxation rate.

2) We cannot borrow any more because we have already tried that and now carry so much debt that simply servicing the debt we have is the best we can do.

3) We cannot print money, or at least we cannot be seen to be printing money for very long, because that will devalue our currency and create inflationary pressures in our economy. We all know what happened in Germany before the Second World War.

4) We have no choice but to cut our expenditures, and that means reducing our social services and investment in our social infrastructure.

Now, before we go any further, let’s deal with the objections that have already arisen in your mind.

1) “Taxes can be raised.”
It is true, we could be more effective in our tax collection practices and we could probably tax certain activities more than we are. In most countries, that have income tax rates at or above one third and sales taxes of between ten and twenty percent, there is actually relatively little room to raise taxes without deflating economic activity. However, the most important point here is that it would take really high rates of taxation, high enough that almost everyone would agree they were too high, to raise sufficient revenues to cover an even moderately ambitious social investment program. When you do the math you realize that you cannot tax your way out of this problem. If anyone tells you that you can tax your way out and that there are examples of countries that are, you can safely tell them that those examples, and that math, is dependent on borrowing demand from another society, i.e. unbalanced trade. There is no sustainable taxation solution to the problem of affordable social infrastructure.

2) “We can still borrow more.”
As I write, in the Spring of 2010, this only true for an increasingly small number of countries, rapidly dwindling to only one, and soon to be none. There are counties with vast (unsustainably) exploitable natural resources who can borrow, but they don’t need to.

3) “We can print more money, it’s not the bogey man many say it is. We’ve done it before, we can do it again now. We now have sophisticated financial control mechanisms that allow us to control inflationary pressures. A little inflation is not such a bad thing – it will help to reduce our debt in real terms.”
You can take your pick from those arguments but ask any central banker charged with controlling inflation and you’ll hear a real expert tell you otherwise. Liquidity in a modern economy is a difficult beast to control and playing fast and loose with it will get you in trouble, nine times out of ten. You might be able to increase liquidity inside the banking system for a while, but if that gets out into the general economy (which is where social spending has to occur) you’re going to get inflation.

4) “We can cut other expenses, such as defense, instead.”
A favorite of the passionately well intentioned, but unfortunately deeply flawed. The horrible truth is that the necessary social costs greatly exceed any savings that could be wrangled from waste and militarism. This is not to say that waste and militarism should not be targets for reductions in expenditures, just that even if you’re wildly successful in reducing these expenses you simply won’t be saving enough to pay for the social infrastructure required to make your intentions a reality.

And so we are returned to the matter of cutting expenses. It would seem, and indeed it is true, that we have no choice but to cut our expenses. We can only spend what we can raise from reasonable taxes, and the options to borrow or print our way out of our problems are but short term tactics for delay.

Stumped? Did I take you all the way here just to show you that we have no other options? No, I didn’t. We have to cut expenses but we don’t have to cut our social services. In fact we can increase our services and our rate of investment with the same or less money that we use now. How? Let me show you.

Social services aren’t, can’t, won’t and must not be measured in monetary terms. You aren’t paid in money to help an old lady get off a bus, to change your children’s diapers, pick up a piece of litter or care for an elderly parent. So long as you are secure in your own personal welfare you do these things for free. Well, not actually for free, just free of monetary compensation. You do these things because they are part of your social fabric, and you are rewarded in kind by a cohesive and supporting social fabric around you. Inside the appreciation of this simple mechanism lies the key to unlocking the door that leads to the solution to our problem.

As long as our basic social welfare is secure we make spontaneous and voluntary contributions without monetary compensation. Even those who think of themselves as selfish animals are unavoidably and instinctually engaged by this natural mechanism. We do not have to pay ourselves to deliver our social services, we just have to create the basic security that unlocks our potential for social contribution, by guaranteeing that basic services will be available for anyone who needs them.

The solution that we have not considered yet as an option is revealed to us through simple observation of ourselves in action.

There are still costs that must be paid for with money, but the remaining costs are within reach of a reasonable tax on the economic activity of a sustainable economy. To paraphrase a wiser man than I: pay in money what must be paid in money, and pay in kind what can be paid in kind.

The math adds up, I’ve done it, try it for yourself. Take a reasonable tax on people’s incomes and spend it exclusively on social infrastructure that will guarantee every citizen the bare necessities of life. We can afford to guarantee everyone basic shelter, sustenance, education, healthcare, public transport, access to information and legal services. Not everyone will want them all, most will only use some, and a few will use none at all. But a reasonable tax on economic incomes will generate sufficient monetary revenues to pay for the monetary components of a guaranteed basic social infrastructure for all. The enablement of this basic infrastructure removes the monetary cost of its own delivery through the liberation of natural human tendencies.

The mechanisms to enable this solution are already in place: democracy, tax collection and service delivery. All we have to do is subtly reorient our priorities and activities to dedicate income tax revenues to guarantee a basic standard of life. It would take less than three years to be fully implemented in most nations today, and would not require any dramatic upheavals to any of the basic economic systems already in operation. It will require us to reimagine the possible, but that is well within our grasp.

Here’s how it works. I, and you, are guaranteed by our compatriots at least the bare essentials for a reasonable life: a roof over my head, some healthy food, access to a doctor, education, local public transport and the Internet. Understanding that these basic services are available, I am free to seek whatever work I can find to supplement these services with cash, that I can use for discretionary activities like entertainment and comfort. There is no minimum wage because my basic life sustaining needs are guaranteed, and also I am not forced to accept any job just to keep body and soul together. In fact, I only have to work for as many hours as I need to meet my needs for discretionary income; I am free to spend the rest of my time at leisure or helping out in my community, should I choose to do so. “But what about those who choose to neither work nor contribute?” They would have no discretionary income, and everyone has discretionary desires – in time desire will lead to work and contribution. In this situation the monetary cost of our time is reduced and this same reduction makes the provision of the social services affordable from a reasonable tax. In fact, the more I help out voluntarily in my local community the lower the cost of those services and therefore the lower the rate of tax on my income.

Within three years just about any community could build a community center with a canteen and build or acquire sufficient public housing to fulfill the fundamental elements of the required basic social services. This effort is easily within the grasp of most communities in the industrialized countries. While those are being built nothing else needs to change, and when they are completed and in operation the minimum wage can be abolished. Everyone is freed to work in whatever way they can and want to to earn monetary income. For many life will not have changed at all, they still have their job, go to work every day and earn similar incomes and pay similar taxes. For our governments the cost of delivering social services will have been transformed with plenty of workers delivering the services either completely voluntarily or at substantially lower montary cost, enabling them to balance their budgets while still supporting a vibrant and cohesive social structure.

The square can be circled. This is the option right in front of us that we have not seen. This is the solution, an alternative to socially destructive and ultimately self defeating cuts, that does not require unreasonable taxation, unsustainable borrowing or inflationary printing.

Rinse and repeat, until it sinks in.

After that, to find out more go to Standards of LIFE.

Whatever happened to the European social model?

“Can the debt and deficit laden European welfare states . . . rescue their public finances and reform their social market economies?” asks Timothy Garton-Ash in a column in the Guardian this week. Can any of the Western democracies work their way out of their sovereign debt while maintaining their social fabric? Including the U.S.!?

Even before the bank debt crisis was transferred to the public purse in 2008, gaping holes had started to open in the public accounts of every developed society that was unable to exploit fortuitously local natural resources. The full development of the “social market economy” had not actually been possible until the latter half of the 20th century, and then only the most industrialized societies were able to give it a try. And give it a try they did, without employing the same cold, hard analytical skills that they used to develop their burgeoning, ravenous and muscular economies.

The reality in those countries that did look like social market economies was that they had split into two internal realities. Cold, clear market economies on the one side and warm, fuzzy political fantasies on the other. So long as the political reality didn’t infringe on the operations of the market reality, each could live in their own space, peering occasionally with bemusement into the other reality. The deal centered around the political reality being able to sustain itself without imposing too great a burden on the market reality.
You could ask anyone on the market side and they’d tell you that the politicians weren’t living in reality, that their math skills stunk, and that that “it” would never work – but heck, so long as vast swathes of society were happy to be deluded, and those delusions didn’t interfere too much with the “natural” market forces that really made the world tick… who were they to try and correct the fallacies, right the wrongs or destroy the fantasy?
On the other side, in the political reality, everyone was agreed, with great frustration, that the inhabitants of the market reality were just one enlightenment short of recognizing the inevitable self-destruction inherent in a market economy model that failed to recognize that it was supposed to serve the needs of the political reality.

The disconnect was pretty universal and early in life most people picked or found themselves in one reality or the other, which then shaped and framed their worldview thence forward. The actual reality, the real shared universe, got little attention and virtually no recognition.
What allowed these two realities to persist for a century, and what has now virtually collapsed in 2010, was the subtly corrupted accounting on which the market economies were based, and which sustained the illusion of self-funding welfare societies.

At the beginning, the social welfare provided was very meagre and was available to only a few. For instance, pensions were only subsistence and only a few lived long enough to collect them. In the middle, the economies that supported (funded) the slightly better welfare programs of their age were unconsciously over-muscular, leveraging unbalanced trade, resource exploitation, uncosted environmental pollution and unfair competition to generate unnatural wealth (profits) that made the welfare states that relied on them look affordable. In fact, they weren’t.
The collapse of the Soviet communist system mid-way through this period just “proved” to everyone that asserting the political reality over the market reality was a road to doom. In actual fact it proved the necessity of allowing natural markets to operate and the fundamental role of freedom in human society, but it did not help to frame the proper and useful placement of market economies – it just proved that we need them.
The the later stages, as social welfare developed more fully and costs rose significantly, the market economies of the West started to run out of resources and face greater competition from the rest of the world. In response to those pressures a complex system of debt was used to replace real wealth. The political reality encouraged the markets to manufacture a debt delusion that was bound to crash when it ran out of bubbles to inflate. This happened in 2008 and the real reality, that the political reality is dependent on the market reality, came home to roost. The first response, the understandable reaction to the shock, was denial; and the remedy was to repair the debt damage in the market reality by transferring it to the political reality, by bailing out the banks.

Now we must face the fusion of our political and market realities, if we are to forge a path forward for cohesive human societies. We must face the reality that we cannot account for our social needs with the same mechanisms that are appropriate for our market economies. If we are to build sustainable market societies we must recognize the social rewards of social work alongside monetary rewards for market success. The reality is that the market economy is a smaller realm of activity than the social services realm, and the market economy simply cannot produce sufficient monetary wealth to pay for the the necessary social activity with money.
Transitioning to this fused reality is not hard, or far away. The future of the “social market economy” is the “market economy society“. A subtle but profound transition of emphasis accomplished by an equally subtle and profound change of our priorities. The market economy remains but the political reality is profoundly altered by accepting responsibility for itself and transitioning from dependent to independent.
The market economy society establishes a framework within which the market can operate without responsibility for society, because society has assumed responsibility for itself and the market operates within a space created and nurtured for it by the society. The mechanisms that create this reality are simple and universal as well as being accessible and immediately effective.
In a market economy society the monetary cost of labor is only its commercial value adding quotient. This is true because the society provides the basic services necessary to sustain a reasonable life (shelter, sustenance, transport, education, healthcare, information and the protection of the law) for free – the majority of the cost of these services is absorbed by the citizens of the society in return for the reward of living in a peaceful, free, market economy society.

This is the only desirable and feasible human society. The debt bubble has burst, the industrial growth train has run out track and steam and the elevation of social awareness is irreversible.
The looming “age of austerity” being offered up by the old disconnected realities is neither necessary nor acceptable, as we shall see. The measure of our skill as a product of Nature will be our ability to reimagein our actual reality, with clarity of practice and intention.

Self association addresses key issues at their root causes

The fundamental challenge in the development of human society is to leverage peace for the benefit of all.

Self Association: the legal right of social groups to freely associate themselves within larger groups, as described in the Standards of LIFE for multilayer representation and variable law.

When we look around the world at places where there is conflict and violence, even war, we can distill the root causes into two basic struggles:

  • the right of self-determination
  • control over natural resources

In most ways these two struggles boil down the same issue: the rights of communities to govern themselves. Why is such a basically obvious matter the cause of so much strife? Because the monolithic structures of our outdated political systems have no framework or mechanisms within which local autonomy can be accommodated.

We live in a world where the predominant guiding principles of government have more in common with benevolent imperial dictatorship than with modern democracy. Our nationstates are based on borders defined by cartography more than geography and by control more than empowerment. Having created unnatural and artificial boundaries, it becomes necessary to invoke the appeal of false identities crudely fashioned from a mix of projected ideals, fostered fears and caricatured qualities in order to create any national unity or social cohesion. Because these nationalist identities are so invented, they actually represent no one and are fertile ground for those who would abuse power to satiate their personal foibles.

As rigid, brittle entities our nationstates feel threatened by unique or differentiated identities within their limits and are drawn to suppress their expression lest they lead to separatist intentions. Yet in the very act of suppressing separatism they encourage it by demonizing the separatists while they eviscerate the freedoms of the whole population. The direct negative consequences flowing from these retarded, legacy constructs include: border insecurity, terrorism, migration instability, environmental degradation, inefficient resource utilization and, most significantly, low quality of life for everyone.

Let’s look at these in turn to understand how they go wrong today and how allowing self association would result in better outcomes.

Borders
The current attachments of nationstates to cartographic definitions of their borders is only natural given that those borders are the primary defining characteristic of their identity. The result is a disproportionately muscular attention to border security and, in many cases, actual wars fought over the cartographic definition of the borderline. (Let’s call this “borderline insanity”: the maniacal attachment of ruling elites to remote survey points.)

Now imagine two neighbor nationstates that adopt MLR constitutions and you will see that the two large blocks of color on a flat map will be replaced by a multitude of tiny fragments covering the areas inhabited by both states — each fragment representing a community. The communities will freely self associate into regions and those regions into states. Initially a map that only showed the new states may well look very similar to the nationstates they replaced, but there will be one crucial difference. The borders between the states are now defined by the self association of the communities in those locations, and they are free to change their association from one region to another, and in so doing the border between the states changes by that one small fragment represented by that community. No international treaties required, no wars, no fuss and no one’s business save the citizens of that community.

Now imagine that scenario played out in your conflict area of choice: Israel/Palestine, Kosovo/Serbia, India/Pakistan, UK/Ireland or Russia/Chechnya?

Terrorism
The futility and frustration that spawns the cultures from which terrorism leaps out to thrust insane violence on the innocent are nurtured by the rigid nationstates’ incapacity to accommodate differentiated identities.

Freely associated communities would never harbor the decrepit mentality of terror and anyone disposed to such perspectives would be stifled at their emergence by the lack of shelter, succor and support.

Individual terror is a hazard of the human condition, “terrorism” is the progeny of unnatural social orders resulting from suppressed freedoms.

Migration
Centrally controlled, monolithic societies with rigid borders have a bipolar relationship with migration: they encourage it in good times and demonize it in hard times. Furthermore, the sublimation of community authority makes their migration policies crude at precisely the point where refined and nuanced practice is required.

When migration is managed by the communities that must accommodate it, it assumes the very human dimension that it autonomically has and which larger entities cannot provide. Migration is the movement of individuals between communities and it is at that level but it must be managed. When communities have authority over, and responsibility for, their own configuration migration is rendered moot at any higher level of social structure.

Environment
The control of resources, be it water, minerals, land or energy, is often the driving force behind conflicts between nationstates. The justification used is that the inclusion of these resources within the boundaries of that state will be of benefit to all their citizens.

The actual practice of resource management and exploitation at a macro state level reveals two fundamental flaws in the arguments proffered to support state control. Both of these flaws have their origins in the same characteristic: remote decision-making. The cost-benefit analyses computed by even the most well-intentioned remote actors are based on such poor data that the costs are underestimated and the benefits overestimated. With weak and/or selfish state actors the situation deteriorates further into environmental carnage that results only in the aggrandizement of corrupt central politicians and dealmakers.

The devolution of resource responsibility to democratic local communities results in much more accurate cost assessments and much greater disinclination toward environmental destruction. Local resource management also extracts much greater benefit from the resources at the same time that intercommunity trade, interaction and negotiation are stimulated because full value extraction from the resources requires trade. These trading relationships ensure that the benefits are more evenly and deeply integrated into the societies involved in exploiting the full value of the resource, with lower negative environmental impact.

Efficiency
Large-scale, remote, state actors making poor decisions based on poor data tend to underestimate the true costs of exploitation and so sell the resources at below optimal pricing, resulting in distorted markets where undervalued resources are used inefficiently, because of their low price.

Local ownership that insists on environmentally sound practices and understands the full cost of exploitation will price the resulting resources more accurately, leading to more efficient use. Additionally this fair resource exploitation removes any need to spend money (i.e. other resources) suppressing, repressing and corrupting local populations in the originating region who resist unfair exploitation and may even stimulate separatist ambitions, further exacerbating the cycle of inefficiency.

Quality of life
The fundamental challenge in the development of human society is to leverage peace for the benefit of all. Violence can deliver short-term benefits for the few and if that is only matched by peace, then there is a temptation to gamble on the outcome. Either way, if the benefits only accrue to the few the system is inherently unstable and destined to fail, at which point it is likely to be detrimental to all.

The nationstate is such a system, it subjugates the rights of self-determination in the name of resource control that invariably delivers benefits to the few. Peace is the period during which the few build up resource imbalances and war is the period during which resources are used to protect or enhance the imbalances.

To break out of this destructive cycle it is necessary to adopt social structures which allow for self-determination without social fragmentation. The principle of self association within a multilayered organizational structure that protects local rights while encouraging inter-social cooperation provides the framework for the development of human societies that can exploit the peace dividend for the greater good of all in an inherently sustainable way.

The devolution of the primary organizing structure to our fragmented communities, that then freely self associate into larger and larger social groupings is possible, natural and most likely to ensure our survival and prosperity.

G20: coordinate, stimulate, regulate?

Leaders of 20 nations meet this weekend in Washington, united in their discomfort with their position in the world, their victim status and their common sense that something else is possible.

Together they represent:

  • 100% of the responsibility
  • 90% of world industry
  • 80% of world economic output
  • 70% of the world’s population
  • 60% of the world’s land mass
  • 50% of the world’s resources
  • 40% of the world’s ethno-bio-diversity
  • 30% of the world’s AIDS population
  • 20% of the world’s good intentions
  • 10% of the world’s good ideas

Together, they will produce 0% of the answers and actions capable of leading us all to a sustainable, peaceful prosperity.

On the surface their desires are simple, they want to live long and prosper. They understand in their guts that it would be fair if they could just chop wood and carry water to make ends meet, and have a decent chance at pursuing happiness. Underneath, their goals and ambitions are complicated by a vision tinted by separateness, hearing muffled by unholistic understanding and feeling anesthetized by their knowledge of their own unrepresentativeness.

The features of a group that could deliver solutions would be

  • wholesome representation (integration)
  • common purpose, process and practice (intention)
  • holistic world view (inspiration)

This is a good test run because it represents exactly the kind of coordinated decision-making and action planning that is going to be necessary if we are going to change course from the fate looming over the world in the coming decades, towards our destiny of sustainable peace and prosperity. Achieving the challenging changes that will be required to avert environmental and social degradation, will require inspiration integrated with intention, that stimulates action across the world.

What the G20 leaders could do to start in the right direction:

  • agree to form trans territorial alliances that will allow representatives at the next meeting to represent 100% of the worlds population
  • recognize that national currencies are no longer useful in a globalized economy and yet we are not ready to adopt a global currency, so there must be consolidation towards trans territorial currency units, each managed by an independent central bank
  • define the role of a central bank as an apolitical organization charged with responsibility for management of the money supply, and therefore banking regulation, interest rates and value stability
  • resolve to prioritize their own humanitarian support systems so that coordinated action in the future is about moving forward, not rescuing from past miss steps
  • stimulate microeconomic activity by reforming their tax systems, establishing micro marketplaces, deploying information access networks and implementing basic social security systems
  • advance the Doha round of trade talks by focusing on these two factors:
    • establish the right to food sovereignty
      • remove international recognition of biogenetic patents
      • promote sustainable self-sufficiency
      • ban the export of subsidized agricultural products to stop rich subsidizing blocks contorting the real market for food; if the need is humantarian then give it away
    • establish a carbon tax framework
      • establish unified rates of taxation
      • agree standards governing the use of funds raised from carbon taxes

If Barack Obama was a LIFE Supporter, his agenda would look like this…

The broad agenda is no different that that adopted by the Obama team: stabilize the economy, restore the rule of law and the balance of justice to the people.
To see how the policies and strategies below align with these goals, go to the bottom of this post.

The first thing he would do would be to establish five commissions, each tasked with the development of detailed implementation plans for major policy areas:

  • energy
  • BASE
  • taxes
  • democracy
  • digital identity

The Energy commission
This commission is tasked with the introduction of initial carbon loading taxes starting in January 2010. Commissioners with expertise in the mechanisms of fuel markets, efficiency and environmental impact will have only a few months to determine the initial fuels that will attract a carbon tax and the mechanism by which carbon load will be calculated.
However rudimentary the initial implementation is, it is important that this is started as soon as possible.
All revenues from the carbon tax will be dedicated to the development of renewable energy industries.

The BASE commission
Charged with the assessment costs for the provisioning of all BASE services to all citizens, starting on 1 January 2011. The first task for this commission will be to assess a Shelter Equivalent value that can be used in the housing acquisition program (see below). Mechanisms for the distribution of funds to cover the costs of BASE services are also part of this commission’s responsibilities.

The Tax commission
This commission is responsible for reforming the IRS to allow it to effectively provide income tax collection services on behalf of all constituencies starting on January 1, 2011. Part of this work will be assessing the costs associated with those elements of government that do not fall under the purview of BASE, and will therefore have to be funded from corporate or sales taxes. Using these assessments and the results of assessments by the BASE commission, they will be able to determine the required rates of taxation necessary to cover the existing government budget.

This commission will also be responsible for the establishment of processes by which the tax revenues allocated to BASE services are distributed to the lowest layer constituency appropriate for the delivery of the service.  In many, if not most, cases this will mean distribution to the States until lower layer constituencies are established in 2011 and later.

The Democracy commission
This commission is tasked with reform of the electoral process for federal assemblies (Senate & House) effective 2013, and developing the processes and frameworks that will allow for the development of multilayer representation starting at the community level. Included in the remit for this commission will be the establishment of boundary commission standards and the development of a framework for the election of a world assembly.

The xID commission
Responsible for developing the standards for a xID digital identity system that will be introduced at the beginning of 2012.  Experts in technology infrastructure, digital security and constitutional matters will develop technical, operational and legal standards for the system in compliance with the standards for distributed storage and privacy defined in the xID specification.
 

2009

  • In addition to the establishment of these commissions, during the first 90 days an independent central bank will be created charged with responsibility for the management of the currency and the regulation of banking system.
  • Also in the first three months, the Guantánamo prison and all CIA black sites will be closed and any prisoners deemed to be an ongoing threat to the country brought back to the USA to be tried in courts.
  • Military deployments in Iraq and Afghanistan will start a rapid draw down with the target of returning to a small number of defensible bases within 12 months.
  • Last but not least, draft a constitutional amendment protecting personal freedom of choice in personal space, targeted for ratification in 2011.

Housing acquisition program
As soon as the independent central bank is established and the BASE commission has derived a Shelter Equivalent value (effectively a replacement value for a standardized housing unit), it will be possible for any citizen to sell their primary residence to the public for a payment equal to the Shelter Equivalent. The citizen will retain a 20 year, inheritable, occupancy right to the property but ownership will belong to the community/public. Until BASE services are fully introduced, the tenant will be responsible for the payment of utilities and the costs of maintenance, failure to pay these costs can result in termination of occupancy.
Any mortgage lender will have to surrender their interest in the property in return for the Shelter Equivalent payment.
This program will be in effect until 2011, or the start of BASE services.

Federal legal review
The Justice Department will review all federal laws and rescind any laws on the books that contravene the proposed amendment regarding personal freedom.
The Justice Department will establish a review process for the case-by-case review of the sentencing of all people currently held in custody, or subject to parole restrictions, based solely on convictions under laws that are now to be rescinded.

2010

  • BASE services will be started early for all veterans. Meaning that veterans will have free access to all public services, including housing, sustenance, healthcare, transport, education, information and legal services.
  • Carbon taxes start.
  • Cessation of all non-defensive missions by military personnel in Iraq and Afghanistan. Future military activity will only be engaged in the support of efforts initiated and led by domestic governments that have been democratically elected by their people.
  • Establish regional healthcare authorities tasked with the funding of regional healthcare facilities and practitioners starting 2011 

2011

  • New tax regime starts along with the implementation of BASE services for all residents.
  • Draft constitutional amendments, resulting from the work of the Democracy Commission, presented for the establishment of multilayer representation, variable law, proportional representation elections and the new standards for suffrage, targeted for ratification in 2013.

2012

  • First xID systems online.
  • First world assembly election campaign starts.

At the end of 2012 there will be another presidential election which will provide the people an opportunity for a referendum on the changes made to-date, as well as the proposed constitutional amendments to change the representation and election systems in 2013.
By the beginning of 2013 there will have been elections for all federally elected positions since the announcement of the agenda. This provides for representation that expresses the people’s desires regarding the enactment of the chnages proposed.


Policy Alignment

Economic stablity

  1. Containing the collapse of the housing bubble using the housing acquisition program will stabilize communities by keeping people in their homes and liberating income from debt service that will then be redirected into spending that will stimulate the economy.
  2. Establishing a clear path to a balanced budget, through BASE and tax reform that tackles the social security debts and ties expenditure to revenues, as well as the formation of an independent central bank will restore domestic and global confidence in the economy and our currency, allowing us to borrow credibly should the need arise.
  3. Removing the burdens for pensions and healthcare from industry, by introducing BASE services, will allow for a restructuring of primary manufacturing instead of widespread bankruptcies.
  4. Proper pricing of fuels, through the inclusion of carbon loading, will allow the market to move into the appropriate alternative energy options and will create a fund that can be used for transport infrastructure improvements and the retooling of manufacturing to produce “green” products.

Restoring the rule of law

  1. The introduction of an constitutional amendment to protect personal freedom will do much to restore the public confidence in the rule of law and liberate the judiciary from being confused with the moral police.
    1. Repeal of laws that intrude on personal freedom will free up resources in the judicial, enforcement and detention systems
  2. Restoration of the principles of human dignity and the pursuit of peace will allow us to again champion the rule of law at home and abroad
  3. The establishment of a path to Variable Law will add credibility to the rule of law in our large and complex society

Restoring social justice

  1. Placing the most basic welfare of all citizens at the heart of government endeavor restores the rightful balance that will allow our great economy to flourish once more
  2. Creating the infrastructures for healthcare, education, transport and information will create the opportunity for many to succeed using their own talents, ingenuity and drive
  3. Bringing democratic power back to the communities through reform of our democracy will restore the natural balance between us at the same time that it gives us the ability to take responsibility for ourselves

True capitalism requires social security

True capitalism actually requires a proper system of social support to avoid the unhelpful intervention of governments in the form of corporate welfare.

The trouble with capitalism as a political philosophy, is that it isn’t one. Capitalism is an economic principle and mechanism, but it is not politic. That is that it does not concern itself with the many, nor does it have any interest in the well being of people. In capitalism people are resources, in politics people are people.

One of the lessons of the recent financial turmoil is the recurring reminder that, in the end, governments, on behalf of the people, bear the final responsibility for the welfare of people, and thus must act as the ‘backer of last resort’ for the economy. Without social support this inevitably leads to corporate welfare. There is no other choice: if one believes that the welfare of the people is dependent on the merchants of capitalism, it follows that maintaining the welfare of the people requires the support of the merchants.

The trouble with this is that the merchants are not innately directed by the welfare of the people, and they make very ineffective distributors of social security. It is not in their DNA, and nor should it be. Give a bank a billion and they will use it to make money, what else would you expect from a bank?

If you really want to let capitalism have free reign then you have to make sure that social security is there first. That way corporations can rise and fall according to the laws of the market without having to be rescued by the tax payer, this is the ideal that market fundamentalists espouse. The mechanism of capitalism is dependant for its long term health on the death of unsuccessful ventures, and so society must isolate itself from such deaths, as much as it can.

By providing the social infrastructure detailed in the Standards of LIFE, one can let the market go. When the fates of corporations are not a threat to the basic fabric of the society they thrive in, then they are liberated to pursue their raison d’etre. Furthermore, the micro economic enablement at the core of the Standards of LIFE further isolates the welfare of the public from the failure of any particular enterprise and from the natural cycles of specific industries.

True capitalism, it turns out, actually requires that there is a proper system of social support in place, in order to avoid the unhelpful intervention of governments in the form of corporate welfare.

Iraq, Israel-Palestine, Bolivia et al

These three countries represent a struggle that is playing out in many other places around the world too. It is the struggle to reconcile national, regional and local identities with the long-term and short-term histories of the area.

In all three of these countries the people are struggling  with violence that is the result of the frustration that all sides feel because they cannot see a way forward that reconciles their differences while retaining their dignity.  The current model of national identity, that is a relic of colonial times, was not designed to represent the identity of the people living within the borders, but rather to signify the identity of the controlling authority. The modern age holds out the promise of self-determination and self identification through the espousal of principles such as democracy and individual freedom. Our traditional definitions of geographic boundaries, legal systems and government responsibilities do not provide a mechanism that reflects these modern aspirations.

The Standards of LIFE provides a model for representation, government and legal structures that are aligned with the principles of democracy and individual  freedom. The multilayer structure described in the Standards of LIFE is directly applicable to all three of these difficult, and currently intractable, situations. If adopted by the leaders in these countries, it would provide a practical avenue down which all those concerned could direct their energies without resorting to violence and confident that the result would be an equitable and respectful solution.

The multilayer model for representation in the Standards of LIFE also provides great degree of flexibility in the future definitions of boundaries, this allows for easier and more rapid adoption of solutions to the current situations because all parties are aware that there is the possibility for change built into the structure.

Paired with the principles of variable law  and proportional representation, the government and legal structures described in the Standards of LIFE provide a holistic solution to end the turmoil and the violence in all three of these areas as well as the many others around the world suffering from the same absence of a path forward.